Manulife Buys Hong Kong Tower From Wheelock as Rents Soar

By Kelvin Wong -
Apr 10, 2013

Manulife Financial Corp. (MFC) has agreed
to pay the second-highest price on record for a whole Hong Kong
office tower as companies seeking cheaper rents push up demand
for space outside the city’s Central business district.

Canada’s biggest insurer will pay HK$4.5 billion ($580
million) to the developer, a unit of Wheelock & Co. (20), for the
512,000-square-foot Kowloon East building, the companies said in
a joint statement yesterday. The building is scheduled for
completion by the end of 2015 and will be used by Manulife as
its Hong Kong headquarters, they said.

Demand for office space outside Central, which has the
world’s second-highest office occupancy cost behind London’s
West End, is rising as banks and brokerages seek cheaper
locations to keep costs low amid slowing corporate finance
activities. Monthly rents in Kowloon East rose 4.5 percent in
the first three months of 2013 from the previous quarter to
HK$31.71 a square foot, as those in Central gained 0.3 percent
to HK$98.77 a square foot, according to broker Cushman &
Wakefield Inc.

The price paid by Manulife, equivalent to about HK$8,790 a
square foot, is the second-highest in Hong Kong for whole office
building sale, according to Sigrid Zialcita, managing director
for Asia research at Cushman & Wakefield. Agricultural Bank of
China Ltd. (601288) last year paid HK$4.9 billion for 50 Connaught Road,
near Central.

Kowloon East

Shares of Wheelock rose as much as 1.9 percent and were
trading at HK$42.20 at 9:54 a.m. in Hong Kong. The stock has
risen 8.2 percent this year, compared with the 2 percent decline
in the benchmark Hang Seng Index. Manulife’s shares traded in
Hong Kong rose 2.8 percent to HK$111.80, bringing its gain this
year to 8.1 percent.

JPMorgan Chase & Co. and Bank of America Corp. are among
banks that have leased additional office space in areas outside
of Central in the first quarter, according to Cushman &
Wakefield.

Manulife isn’t the first financial services company to
acquire its own building in Kowloon East, where rents are rising.
China Construction Bank Corp. (939) in March last year paid HK$2.5
billion, or about HK$7,200 a square foot, for an office building
in the area.

The insurer is buying one of the two towers of the One Bay
East commercial complex. Wheelock bought the site for HK$3.53
billion, or HK$3,856 per buildable square foot, in a tender in
2011. The developer, Wheelock Properties Ltd., may sell the
second tower in full or by floors when it’s nearing completion,
Managing Director Ricky Wong said in yesterday’s statement

Wheelock & Co. is controlled by the family of Peter Woo,
who has an estimated net worth of $8 billion, according to the
Bloomberg Billionaires Index. The Hong Kong-based company is the
parent of Wharf Holdings Ltd. (4), owner of two of Hong Kong’s
largest shopping malls and the city’s cable TV operator.

CBRE Group Inc., the world’s biggest commercial realtor,
brokered the transaction, according to the statement.